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Telefonica May Increase its Stake in Telecom Italia

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Spain's Telefonica is reported to be considering increasing its stake in Telecom Italia as the Italian company seeks outside investors to help pay down its debt burden.

Telecom Italia is understood to be looking at revamping its complex shareholding structure which gives control of the company to a minority of shareholders as part of a wide ranging set of options that could also see an outside investor pumping fresh cash into the firm.

Egyptian billionaire Naguib Sawiris was previously rebuffed in attempts to buy a sizable stake in the company and is also said to be interested again.

Spain's Telefonica meanwhile could either sell its stake to help pay down its own debt pile, or buy out some of the shareholders in a holding company that controls Telecom Italia.

That holding company, Telco is owned by Italian financial institutions Mediobanca, Intesa Sanpaolo and Generali -- along with Spain's Telefonica. Two Telco investors, Mediobanca  and Generali have already indicated that they are looking to sell their stakes.

Telefonica owns 42.3% of the holding company, which it bought back in 2007 for EUR2.3 billion. The stake is now estimated to be worth just EUR1.2 billion, so if Telefonica sold, it would have to book a loss on the investment.

Telefónica has just begun talking with the other shareholders about how to shuffle ownership of Telecom Italia, the Wall Street Journal reported, citing people familiar with the situation.

The Italian firm's board of directors are due to meet next Friday to discuss their options.

On the web: Wall Street Journal

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Tags: telefonica  telecom italia  Italy